How did Texas require a seller-financing dealer to report a vehicle sale when the dealer paid all tax at title transfer?

Plain-English summary

The Texas Tax Administration Division said a dealer financing its own sale could elect to pay all tax due to the county tax assessor-collector when timely submitting title and registration documents.

The dealer still needed the same tax permit as other financing sellers. Receipts from a sale on which tax had been fully paid belonged in gross receipts but not taxable receipts on the dealer's return.

House Bill 995 treated tax as paid by or for the purchaser and made the purchaser liable for tax on payments not received by the seller. The letter therefore denied a refund based merely on the purchaser's failure to complete payment.

What this means for you

Seller-financing dealers

Paying tax upfront did not remove permit or return-reporting obligations.

Title staff and dealership accountants

The historical return separated gross receipts from receipts still subject to tax.

Common questions

Q: Could the dealer pay all tax at title transfer?

A: Yes.

Q: Were those receipts omitted from the return entirely?

A: No. They were reported as gross receipts but not taxable receipts.

Q: Did buyer nonpayment create a refund?

A: No.

Citations and references

• Texas House Bill 995 — cited for purchaser liability on payments not received by the seller.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/9309184L

Original ruling text

September 24, 1993

Dear **:

This letter is in follow up to our recent conversation concerning tax
collection on seller-financed sales of motor vehicles.

A motor vehicle dealer who also finances the sale may elect to pay the entire
amount of tax due on the transaction to the appropriate County Tax
Assessor-Collector with the timely transfer of the title and registration
documents. The tax is based on the total consideration paid and to be paid on
the vehicle.

The selling dealer must obtain a tax permit in the same manner as all other
financing sellers. The receipts received from sales on which tax is paid in
full to the County Tax Assessor-Collector must be included under gross receipts
on the dealer's return. Those receipts should not be included in taxable
receipts on the return.

All parties should be aware that tax will be presumed to be paid by or for the
purchaser. And, because HB 995 provides that the purchaser is liable for tax on
any payments not received by the seller, no refund of tax based on the
purchaser's failure to fully pay for the vehicle will be available.

If you have any questions please give me a call.

Sincerely,

Curt Swenson
Tax Administration Division